At some or the other stage of our lives we need to fund a need that we cant manage with our current cash flow. These needs could be a vacation abroad, a new house, a car or a family function. This is the stage when loans come to our help.

Types of loans:

Loans could be secured or unsecured. Unsecured loans are not backed by any security or collateral. Credit cards are examples of unsecured loans. Secured loans are backed by a collateral or security and hence the term secured. The collateral could be a house in case of a home loan or the vehicle in case of a vehicle loan.

When does a borrower need these loans?

UK residents borrow billions of pounds every year. Borrowers take these loans to meet the high standard of living which they may not be able to do at their current income level. It is a very practical option to take a loan these days. The interest rates are low, easy repayment option are available and above all if a borrower does a bit of shopping around he/she can get the best deal.

Interest rates on a secured loan:

In case of secured loans the interest rate is known as annual percentage rate or APR. APR in case of a particular loan depends on a host of factors like borrowers credit history, loan amount, loan duration and some times on the lending institution. The interest rates are the lowest on secured personal loans in the UK. APR typically ranges from 6% to 25%. As a borrower you may get the best interest rate if you have a very good credit history backed by collateral. Real estate properties command the lowest APR since the property serves as a collateral and there is less depreciation in the property. Other forms of loans like vehicle loans command an interest rate that is greater than that in case of real estate.

How is the collateral handled by the lender?

The lenders do not interfere with the property or collateral being used by the borrower. Only when borrowers do not pay up the installment amount over a long period of time and after repeated reminders the lenders take the possession of the collateral. Getting a secured loan in UK is cheap and very convenient. Secured loans are economical for the borrowers because of the low interest rates.

How does a secured loan create a win-win situation for everyone?

If you have no established credit history or a bad credit history then secured loans are the type of loans that you should look out for. Immigrants to UK might face this problem because of a lack of an established credit history for them. Lending institutions find it convenient to give out secured loans rather than unsecured loans by virtue of the collateral that the borrowers offer. The borrowers are also less likely to default the loan because of the fear of losing their collateral. This way secured loans in UK are creating a win-win situation for everyone. A borrower with a good credit history, collateral and good income sources can expect loan amounts to the tune of 125% of his/her property value.

How customer oriented is the whole process of obtaining a loan?

In UK the borrowers have very flexible borrowing options which are quite similar to the unsecured loans. The lenders have also started offering web based application methods